Pot Bank Begs for Access to Nation’s Banking System

DENVER (AP) — The booming marijuana industry went to a federal judge Monday seeking an answer to the problem that has vexed business owners trying to emerge from the black market: Now that pot is legal and taxed in some states, why can't they put the proceeds in a bank?

A Colorado credit union designed to serve the pot industry – Fourth Corner Credit Union – was challenging a decision by the U.S. Federal Reserve Bank of Kansas City to keep the pot bank from accessing the nation's financial system. The feds' rejection earlier this year means that the pot bank can't take deposits or issue credit – leaving many marijuana businesses operating on a cash-only basis.

"What do you want us to do with the money?" cried an exasperated Mark Mason, lawyer for the credit union, which was chartered by Colorado last year but has been unable to start taking customers.

The credit union claims that although marijuana remains illegal under federal law, the Federal Reserve as a quasi-government institution lacks the authority to keep marijuana banks out of the nation's financial system. Mason argued that a pot bank would serve the government's interest in keeping better tabs on the drug money.

"They intend to take this money out of shadows and off of the street so that they can track it and trace it," Mason argued.

But the Federal Reserve lawyer insisted the bank is too risky.

"It's a risk the Federal Reserve has decided they don't want to take on," said Scott Barker, arguing for the Federal Reserve.

U.S. District Judge R. Brooke Jackson repeatedly said he sympathizes with the struggling pot businesses. Jackson twice called existing federal guidance on marijuana money a "nothingburger," meaning that memos from the Treasury and Department of Justice don't solve the federal-state conflicts caused by legalizing pot.

But he seemed hesitant to order the Federal Reserve to give a pot bank access to the banking system as long as the bank is relying on memos from federal agencies, and not an act of Congress, to say pot shops should have a way to avoid dealing in cash.

"We think there ought to be banking and regulation. I get that. I agree with that. But that's not the legal question here, is it?" Jackson said.

The pot bank's lawyer argued that national marijuana legalization is inevitable, but Jackson retorted that the pot bank should take up its problem with Congress and not the courts.

"If I were in the Congress, I'd vote for you, but I've got to do the job of a federal judge here," Jackson said.

The judge repeatedly tried to encourage the sides to work something out themselves, perhaps by agreeing that Fourth Corner would serve only people who believe marijuana should be legal, not taking money from businesses that sell pot.

Jackson pointed out that hundreds of banks already do take pot proceeds, even if they sometimes pretend they don't know what they're doing. For example, the state of Colorado uses Wells Fargo bank, meaning that tax proceeds from the sale of marijuana goes into the nation's banking system already.

"I think there's a certain unfairness to allowing these big banks to serve this business and keeping you out.

"But it's not for me, I don't think, to decide issues of fairness or policy. My job is to enforce and apply the law," Jackson said.

The judge has no deadline to decide the case. He joked that if he issued a ruling Monday, the losing side would file an appeal "before I could go home and watch the Broncos game tonight."